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The North America Biotechnology Sectors : A Company and Industry Analysis (February 2006)
Mergent, Feb 2006
This report looks at the biotechnology industry in the United States and Canada
Current Environment - Key Points
- Large-cap biotechs in the US made big gains in 2005 as reflected by the 27% increase of the AMEX Biotech Index
The NASDAQ Biotech Index, which represents smaller biotechs, mirrored the broader market with its 3% gain in the year
- The second half of 2005 saw leading biotechs in North America turn in an excellent performance demonstrated by rising revenues, stable cash position, active research and development (R&D) activities and strong growth prospects
- The news about a potential outbreak of the avian flu has shaken the long dormant vaccine business
It has driven a consolidation of the vaccine business in North America while spurring efforts in biotech companies to find new ways to develop and manufacture vaccines much more efficiently
- In the second half of 2005, there were eight biotech IPOs completed in the US and two in Canada
Industry Profile - Key Points
- There are currently about 1,473 biotech companies in the US
The US biotech industry has been growing at double digit rates annually according to Biotechnology Industry Organization (BIO)
In 2004, the industry generated sales of $46 billion, up from $8 billion in 1992
- Canada has about 450 biotech companies
It is ranked third behind the US and UK in terms of revenues, but is ranked first in the world in terms of R&D expenditure per employee according to BIOTECanada
- In the US, total financing increased consistently during each successive quarter up until the third quarter in 2005
Total investment in venture capital (VC) in the third quarter was up 7% from the corresponding quarter in 2004, according to Burril & Co, a San Francisco-based global life sciences merchant bank
- In Canada, VC investment in life sciences tracked by Canadian VC expert, Macdonald & Associates, fell 32% in the third quarter of 2005 from the corresponding quarter in 2004, as investors withdrew from all sectors following a very active second quarter
Market Trends and Outlook - Key Points
- Industrial and environmental biotech is causing other industrial sectors such as chemicals and paper, to adopt efficient and environmental friendly biotech applications to replace conventional methods in their operations
- More states in the US are developing strong local ethanol industries to make themselves less dependent upon outside sources of energy
There are currently 93 ethanol plants with at least ten undergoing expansion and 31 additional plants under construction, according to the American Coalition for Ethanol (ACE) - The revolution of personalized medicine is attracting investors as it swiftly makes its way into the clinic driven by advances in biotech and computer software
- Canadian biotechs may face greater pricing pressures due to escalating healthcare spending in the country
Estimates by The Canadian Institute for Health Information (CIHI) showed that spending on healthcare will amount to C$142 billion (US$121.5 billion) in 2005, an increase of 7.7% over 2004
- Despite being pushed for modification, the Canadian regulatory approval for biotech products remains science-based, which means that the regulatory process involved is based upon the plants- traits rather than the method used to introduce the traits
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